Cost per hire
In one sentenceThe average the business spends to hire a new employee, including advertisements, recruitment agency fees, government fees and interview time, before the employee starts work.
Simply put
Add up everything you spent on hiring in a period, then divide it by the number of people hired in it, and you get the cost per hire for one employee.
This figure shows the owner that keeping a good employee is usually cheaper than replacing him, and helps estimate the effect of a high turnover rate.
Worked example
An online store hired 3 employees during the quarter, spent 3,000 SAR on job advertisements and 7,000 SAR on a recruitment agency fee, and estimated interview time at 2,000 SAR.
Total hiring costs: 3,000 + 7,000 + 2,00012,000
Number hired3
Cost per hire: 12,000 ÷ 34,000 SAR
Formula: Total hiring costs in the period ÷ number hired in it
Don't confuse it with
True employee costCost per hire is spent once to get the employee, while the true employee cost is what the employee costs every month after hiring.